LBMA’s Responsible Sourcing initiative ensures the provenance of precious metals and protects the integrity of the global supply chain.
Vital to the credibility of the standards is the broad scope, which includes measures to combat money laundering, terrorist financing and human rights abuses.
The LBMA’s Responsible Sourcing Programme was set up to consolidate, strengthen, and formalise existing standards of refiners’ due diligence. The Responsible Gold Guidance has been mandatory for all gold Good Delivery refiners since 2012, and the LBMA has recently expanded the scope of its responsible sourcing framework to include silver which becomes a mandatory requirement for all silver GDL refiners from 1 January 2018.
Refiners are audited annually and are required to publicly report.
OECD Due Diligence for Responsible Supply Chains
The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict Affected and High Risk Areas provides recommendations to enable companies’ implementation of responsible sourcing practices with respect to human rights and avoiding contribution to conflict.
The LBMA, along with representatives from its membership, was actively involved in drafting the Gold Supplement section of the OECD Guidance. The LBMA continues to support the work of the OECD in the area of supply chain due diligence and related projects. In addition, Ruth Crowell, the LBMA's Chief Executive, is the Vice Chair of the OECD Gold Forum Multi-Stakeholder Steering Group, which represents the interests of stakeholders from OECD and non-OECD countries, industry and civil society.
Approved Service Providers
The LBMA accredits auditors and assurance providers to enable them to conduct Responsible Gold and Silver Audits. The Approved Service Providers List is updated on a regular basis. To become an Approved Service Provider, auditors and assurance providers must complete the Approved Service Provider Application Form and return it to the LBMA for consideration.
Responsible Sourcing Webinars
Neil Harby, LBMA Chief Technical Officer and Simon Houghton-Dodd, LBMA Compliance Officer presented the latest webinar on the new Responsible Silver Guidance, Version 7 of the Responsible Gold Guidance, and the future Responsible PGM Guidance. Future developments including sustainability, environment and governance were also covered.
As well as launching the LBMA Responsible Silver Guidance, this webinar also highlighted some of the changes to the Responsible Gold documentation as well as evolving industry practices.
Responsible Gold Guidance
This framework is mandatory for all refiners wishing to sell into the London Bullion Market. This is intended to assure investors and consumers that all London gold stocks are conflict-free due to compliance with an audited, conflict-free process.
The LBMA Responsible Gold Guidance (v7) consolidates and formalises pre-existing high standards of refiners’ due diligence. The Guidance is based on the OECD Due Diligence Guidance as well as Swiss and US KYC, Anti-Money Laundering and Combatting Terrorist Financing regulations.
Version 7 of the Guidance now includes the requirement for all refiners to provide a list of countries of origin for both mined and recycled material. From 1 January, 2018 refiners will also have to report the quantity of metal being sourced from each jurisdiction.
Since January 2012, accredited gold Good Delivery refiners have undergone yearly audits against the LBMA’s Guidance. The LBMA Brochure provides further information about the work of the LBMA in relation to Responsible Gold.
Third-Party Audit Guidance
The Third Party Audit Guidance for Gold facilitates transparency and ensures consistent implementation of the Responsible Gold Guidance, with detailed guidance for auditors and refiners when undergoing the Responsible Gold Audit.
Responsible Silver Guidance
To reinforce LBMA’s commitment to responsible sourcing practices within the Good Delivery Lists, from 1 January 2018 compliance to the new LBMA Responsible Silver Guidance becomes a mandatory requirement for all refiners wishing to sell into the London Bullion Market. This is intended to assure investors and consumers that all London silver stocks are responsibly sourced.
The LBMA Responsible Silver Guidance consolidates and formalises pre-existing high standards of refiners’ due diligence. To minimise the additional resources required by refiners who produce both gold and silver GDL bars the silver guidance is aligned with the existing LBMA Responsible Gold Guidance facilitating the concept of multi-metal audits. The introduction of the new RSG aligns the requirements for both gold and silver GDL refiners adding a further layer of credibility to the GDL system.
To learn more, please refer to the LBMA training webinars and material available below.
Third-Party Audit Guidance
The Third Party Audit Guidance for Silver facilitates transparency and ensures consistent implementation of the Responsible Silver Guidance, with detailed guidance for auditors and refiners when undergoing the Responsible Silver Audit. This Guidance also describes the requirements for refiners undergoing a multi-metal (combined gold and silver) audit.
The Compliance Officer is responsible for the day to day running of the programme, when non-conformances arise these are escalated to the Audit Review Panel for review and action. The ARP report to the Executive Committee (ExCom) on all matters relating to the management, governance and development of the Responsible Sourcing programme. The Physical Committee will be notified of the ARP action. The Regulatory Affairs Committee oversees the policy development and implementation of the Responsible Sourcing programme for example the complaints mechanism and incident handling procedure.
Responsible Sourcing Guidance Development
The LBMA regularly reviews the content of its responsible sourcing guidelines to take into account emerging trends, new or amended regulation, ensuring they remain relevant, accurate and provide the correct level of protection to the Good Delivery System.
Incident Review Process
The Incident Review Process is invoked in response to a particular stimulus of a reputational nature. Information can come from a variety of sources (trade associations, law enforcement agencies, market intelligence etc.) and the LBMA will seek corroboration wherever possible as part of the process. Due to the sensitivity involved, the LBMA may keep the process confidential until the issue has been resolved.
Refiners can raise concerns about the process directly with the LBMA, complaints must be made in writing and accompanied by supporting evidence, examples could be:
- Conduct of an auditor
- Disagreement over the outcome of an audit
The Compliance Officer will review the details of the complaint and the outcome will be formally communicated to all interested parties.
The LBMA takes the Incident Review Process very seriously and failure to meet the standards required has serious implications for GDL refiners. Sanctions could include suspension subject to resolution or being moved to the former List with immediate effect. To date, four refiners and one auditor have been removed from the LBMA lists.
Refiners should develop and publicise a mechanism allowing any employee or external stakeholder to anonymously voice concerns over the gold supply chain or any newly identified risk. Similarly people involved in the gold supply chain are encouraged to contact the LBMA with any legitimate concerns they may have over the gold supply chain, a refiners activities or any newly identified risk.